The downpayment is a HUGE factor in affordability. Realistically, the number of people who have even $30,000 saved up for a home is miniscule. Someone who has the rare discipline to save $1000/month will take 3 years to come up with this amount. That is a long time and doesn’t even take into account emergencies, job loss or the ever increasing cost of living coupled with stagnating income growth which makes saving money even more difficult as time goes by.
Currently 95% LTV maybe possible if you have a great credit score, but as the foreclosure mess unravels I doubt there will be anything more than 90% LTV. At current prices that would require a staggering $80,000 for downpayment and closing costs to bring to the table for a median home.
People with this kind of financial stability are rare among typical first time homebuyers (late 20s, early 30s).
Besides downpayment, what about reserves and emergency fund. If a homeowner doesn’t have reserves in addition to the downpayment they may quickly find themselves in trouble. That brings the total amount of savings to about $100,000. How many 30 yr olds do you know with 100k in the bank?
